Real Personal Income Declines for the 9th Time in 10 Months – Mish Talk

March 31, 2022

The Bureau of Economic Analysis (BEA) released Personal Income and Outlays data for February of 2022 today.

The spotlight on this post is on real (inflation adjusted) Personal Consumption Expenditures (PCE) and real income.

The difference between “real income” and “real disposable income” is the latter is after taxes.

Inflation adjusted, real disposable income actually declined for the 10th time in 11 months but I called it 9 of 10 because of stimulus distortions.

Real Income and Spending Billions of Dollars

Real Income and Spending data from the BEA, chart by Mish

Chart Notes

The three rounds of fiscal stimulus, one under Trump and two by Biden are clearly visible.
The stimulus radically distorts month-over-month numbers and year-over-year percentage numbers one year later. My title “9th time in 10 months” factors out a huge month-over-month percentage decline due to stimulus distortions.
The difference between Real Personal Income (yellow line) and Real Disposable Personal Income (red line) is taxes.
Real income has been declining for nearly a year.
The difference between disposable income and spending is savings. But most of the saving is from high wage earners, not the bottom half of the nation mostly living paycheck-to-paycheck.

I emphasize real income and spending because that’s what drives GDP.

Table as Presented by the BEA

Table from BEA, annotations by Mish

Table Notes

Chained dollars are inflation-adjusted (real) dollars.
Disposable personal income rose by 0.1% in February, but accounting for inflation, real income dropped by 0.5%.
Prices rose by 0.5% or more four consecutive months, three of them by 0.6%.
The PCE price index, not the CPI is the Fed’s preferred measure of inflation.

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CPI Up Most in 40 Years

For more on the CPI, please see Consumer Price Index Jumps to 7.9 Percent, Another New Four-Decades High

Alleged “Benefits of Running the Economy Hot”

Meanwhile, Charles Evans, president and chief executive officer of the Chicago Fed wants to run the economy hot.

For discussion, please see Chicago Fed President Praises the “Benefits of Running the Economy Hot”

2021 Set New Annual Records for Home Prices. 2022 Continues the Trend

Finally, please note 2021 Set New Annual Records for Home Prices. 2022 Continues the Trend.

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